Finance Act 2004

Private residence relief: cases where relief obtained under section 260

6 After section 226 of the Taxation of Chargeable Gains Act 1992 insert—

“226A Private residence relief: cases where relief obtained under section 260

(1) This section applies where—

(a) section 223 applies, or would apart from this section apply, in relation to a gain or part of a gain accruing to an individual or the trustees of a settlement (“the transferor”) on a disposal (the “later disposal”),

(b) in computing the chargeable gain which would, apart from section 223, accrue to the transferor on the later disposal, the allowable expenditure would fall to be reduced, and

(c) that reduction would to any extent fall to be made in consequence, directly or indirectly, of a claim or claims under section 260 in respect of one or more earlier disposals (whether or not made to the transferor).

(2) If a claim for relief under section 260 in respect of—

(a) the earlier disposal, or

(b) if there were two or more such disposals, any of them,

is made on or before the making of the later disposal, section 223 shall not apply in relation to the gain or part of a gain accruing on the later disposal.

(3) If a claim for relief under section 260 in respect of—

(a) the earlier disposal, or

(b) if there were two or more such disposals, any of them,

is made after the making of the later disposal and subsection (2) above does not apply, it is to be assumed for the purposes of capital gains tax that section 223 never applied in relation to the gain or part of a gain accruing on the later disposal.

(4) All such adjustments shall be made, whether by discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to subsection (3) above (notwithstanding any limitation on the time within which any adjustment may be made).

(5) Where the later disposal is made by the trustees of a settlement, the references in subsections (2) and (3) above to the making of the later disposal shall be read as references to the making of a claim for relief under section 223 in respect of the gain or part of a gain accruing on that disposal.

(6) If a claim for relief under section 260 in respect of an earlier disposal is revoked, this section shall apply as if the claim had never been made.

(7) This section is subject to section 226B (exception for maintenance funds for historic buildings).

226B Exception to section 226A

(1) Section 226A shall not apply in relation to a later disposal made by the trustees of a settlement if the trustees have elected that section 691(2) of the Taxes Act (certain income of maintenance funds for historic buildings not to be income of settlor etc) shall have effect in the case of—

(a) the settlement, or

(b) any part of the settlement,

in relation to each year of assessment in which a relevant earlier disposal is made.

(2) In this section “relevant earlier disposal”, in relation to a later disposal, means an earlier disposal in respect of which a claim mentioned in section 226A(1)(c) is made.

(3) This section is to be construed as one with section 226A.”.